Switzerland, known as a haven for the super rich, will soon vote on whether to introduce a steep inheritance tax.
Switzerland and high taxes are not natural bedfellows. Indeed, the land of soaring snow-capped peaks and cuckoo clocks is more commonly thought of as a synonym for wealth preservation than redistributive policies.
Nonetheless, a group of political activists from the youth wing of the Social Democratic Party, Jeunesse Socialiste, has set about campaigning for radical change, forcing the issue of inheritance tax onto a national ballot.
This Sunday, 30 November, Swiss voters will decide whether to place a 50% inheritance tax on bequests and inheritances above 50 million CHF (€53.57mn).
The chances of the initiative succeeding are slim to non-existent. According to a recent poll from Tamedia/20 Minuten, 75% of voters in Switzerland are expected to reject the tax on the super rich, up from 67% in October.
Although the proposal is poised to fail, some fear that the upcoming referendum may harm Switzerland’s reputation as a tax haven.
The country’s wealth management industry is the largest and most competitive in the world, with international assets worth $2.2 trillion (€1.9tr), according to Deloitte. But its primacy in that world is being challenged by rivals such as Singapore and the UK.
“Some wealthy individuals have reportedly postponed plans to move to Switzerland because of the initiative. However, this evidence comes mostly from anecdotal reports by tax advisers, making it difficult to assess the scale or significance,” said Isabel Martínez, senior researcher at the KOF Swiss Economic Institute at ETH Zürich.
Mobilising for climate action
The tax proposal, entitled "For a Social and Fiscally Fair Climate Policy”, proposes to spend the revenue collected on climate change initiatives.
“Switzerland is not doing enough to protect the climate,” said the Jeunesse Socialiste group in a statement. “Several billion more would be needed each year to meet the Confederation's targets … With the initiative for the future, those primarily responsible for climate degradation should contribute more to its protection.”
After already reaching 100,000 supporters to reach the ballot box, the inheritance tax will become law if more than 50% of Swiss voters back it and a majority of the country’s 26 cantons vote in its favour.
Risks for businesses
Such a prospect is not only unpopular among the super-rich, but also small Swiss business owners.
Swissmem, the voice of Switzerland’s mechanical, electrical, and metal-engineering industries and technology sector, argued that the tax would “effectively lead to the expropriation of many family-run SMEs”. The group added: “A large number of these SMEs have been built up by the owning families over generations, provide tens of thousands of jobs, and pay taxes reliably.”
Isabel Martínez noted that similar concerns were brought up when Swiss voters rejected a more moderate initiative in 2015, proposing a 20% tax on estates above 2mn CHF (€2.14mn).
“Fewer than 2% of the population would have been directly affected, but still 71% voted against it. The main concern was that many family businesses and SMEs would be negatively affected, ultimately harming the Swiss economy and threatening jobs,” she told Euronews. “The same concerns apply to the current proposal.”
Some opponents also dislike the fact that the tax is federally imposed, undermining cantonal tax autonomy, she explained.
Limited revenue gains
In most countries that levy inheritance taxes, the measures are generally unpopular among voters although only a small minority of people end up paying them.
While the measures can help to reduce inequality, they have a limited capacity to collect revenue.
In 2023, inheritance, estate, and gift taxes accounted for only 0.41% of total OECD tax revenue on average. Among European countries, the levies made up just 0.40% of total revenue.
At a time when fiscal pressures are mounting on governments and the climate crisis is intensifying, Switzerland must now decide the best way forward.
